Question
You have been hired to run a pension fund for TelDet Inc, a small manufacturing firm. The firm currently has $5 million in the fund
You have been hired to run a pension fund for TelDet Inc, a small manufacturing firm. The firm currently has $5 million in the fund and expects to have cash inflows of $2 million a year for the first 5 years (.04 growth rate) followed by cash outflows of $ 3 million a year for the next 5 years (.02 growth rate). Assume that interest rates are at 8%. a. How much money will be left in the fund at the end of the tenth year? b. If you were required to pay a perpetuity after the tenth year (starting in year 11) out of the balance left in the pension fund, how much could you afford to pay? include growth rates
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